Consultation Paper on Small Claims Tribunal Ordinance (Cap. 338) - Cost

CONSULTANTS PAPER ON SMALL CLAIMS TRIBUNAL

ORDINANCE (CAP.338) – COSTS

 

  1. Further to our paper of 15th September, 2000, we have
    been asked to comment on the additional proposal put forward by
    the Administration to limit a party’s entitlement to costs in the
    District Court or the Court of First Instance where the proceedings
    have been transferred from the Small Claim Tribunal pursuant to
    section 7 of the Small Claims Tribunal Ordinance.
  2.  

  3. The proposal has been put forward by the Administration on the
    ground that to allow costs in the District Court or the Court of
    First Instance where the claim is within the small claims jurisdiction
    (i.e., less than $50,000) would be contrary to the policy behind
    the Small Claims Tribunal Ordinance which is to protect litigants
    with small claims against potentially disproportionate legal costs.
  4.  

  5. The Administration has proposed that a party’s entitlement to costs
    in cases transferred from the Small Claims Tribunal to the District
    Court or the Court of First Instance should be limited to the same
    kind of costs as are recoverable in the Small Claims Tribunal itself.
  6.  

  7. Whilst we note the Administration’s desire to protect litigants
    in small claims against potentially disproportionate costs, we are
    concerned that in preventing the successful party from recovering
    his costs where the proceedings have been transferred to the District
    Court or the Court of First Instance merely on the ground that the
    monetary value of his claim is small may give rise to serious injustice.
  8.  

  9. The starting position is that litigants have the right to have
    their disputes resolved in a court. Procedural limitations can only
    be justified insofar as they do not unduly impede access to justice.
    Under the existing framework of the Small Claims Tribunal Ordinance,
    the Small Claims Tribunal offers a relatively informal and inexpensive
    forum for the adjudication of small claims. Costs are kept low because
    legal representation is excluded and litigants are expected to appear
    in person. The no-costs rule is a natural corollary of the exclusion
    of legal representation.
  10.  

  11. However, it is recognised that the Small Claims Tribunal is ill-suited
    to dealing with complex cases involving difficult issues of law
    and that is why section 7 of the Ordinance provides for transfers
    to the District Court of the Court of First Instance. By their very
    nature, such cases are likely to require legal representation; the
    costs of which for one of the parties alone can easily exceed the
    amount of the claim (max. $50,000). Given that it is unrealistic
    to expect litigants to be able properly to prosecute or defend these
    cases in person, if the successful plaintiff were not allowed to
    recover his costs, his right of action would be worthless to him.
    There is even less justification for forcing a successful defendant
    to bear his own costs of defending the claim (the bringing of which
    is not of his own choosing).
  12.  

  13. Whilst it may be argued that parties should be discouraged from
    litigating small claims at disproportionately large costs, we do
    not believe that procedural impediments should be placed in the
    path of potential litigants. As a matter of principle, litigants
    (however small may be the monetary value of their claims) should
    not be pressured into abandoning their claims (or defences) simply
    because complex legal issues are involved.
  14.  

  15. In the light of the above, we believe that the award of costs
    in small claims proceedings transferred to the District Court or
    the Court of First Instance, like the award of costs on appeal,
    is necessary for the proper administration of justice. In
    this regard, we also believe that the policy behind the Small Claims
    Tribunal Ordinance is only to cut down on unnecessary costs and
    it does not require an extension of the no-costs rule of the Small
    Claims Tribunal to proceedings transferred to the District Court
    or the Court of First Instance.
  16.  

  17. If changes have to be made, we would recommend extending legal
    aid to cover small claims proceedings in the District Court or the
    Court of First Instance, subject to means-testing.

 

Dated 7 February 2001

Hong Kong Bar Association